An unfortunate dispute between the state Department of Health and Wai'anae's largest private provider of mental healthcare services has resulted in painful consequences: The loss of up to $2 million in state contracts, resulting in a 40 percent cut in the budget of Hale Na'au Pono, which has served Wai'anae for more than 20 years.

Caught in the middle are about 400 of Hale Na'au Pono's clients, who face potentially disruptive and wrenching changes as they switch to other providers.

It would be easy to blame the state, as some have, and demand that the money be restored immediately.

But it's not that simple. The state is obligated to ensure that all agencies that receive taxpayers' money — especially to care for such a vulnerable group as the seriously mentally ill — follow established rules and submit to thorough and verifiable reviews of their work.

No private agency, not even one as unique as Hale Na'au Pono, can claim an exemption.

But this is what Hale Na'au Pono's executive director, Poka Laenui (also known as Hayden Burgess), wants to do.

Laenui objected to how the state conducted its compliance audits, saying there were too many, which interfered with the agency's work.

The state, in turn, said Hale Na'au Pono made it difficult to obtain information needed to verify the quality of service it provides.

Clearly, the state should not pay for programs it can't properly audit. The burden rested with Hale Na'au Pono to ensure the state's needs were met in an approved and timely fashion.

Laenui objected to the state's minimum requirements for staff expertise, experience and education, saying they were unfairly strict. Hale Na'au Pono did not meet the requirements, the state said, again raising questions about the quality of care.

Laenui also objected to the state's reporting requirements for and definition of "sentinel events" - major incidents such as attempted suicides or violent actions. The state, which tracks such events to study trends, said Hale Na'au Pono did not report several events that it should have.

Exasperated state health officials finally pulled the plug, saying that they will contract with other agencies that can provide services as good as, if not better than, what's available at Hale Na'au Pono.

This remains to be seen.

Hale Na'au Pono provides a broad array of services, from a robust social clubhouse to substance abuse treatment programs, matched to the unique needs of the Wai'anae community.

"We are the agency known for protecting our consumers," Laenui said.

It's a commendable policy, unfortunately subverted by Hale Na'au Pono's quarreling over contract terms it was required to follow.

Now its clients must find proper care and protection elsewhere. Hale Na'au Pono should help them do so.